It appears that more even than the Fed, the market, being a perfectly insane reflexive device, saw the 0.1% knee-jerk drop in stocks, and took that as a far greater THE NEW QE™ catalyst than anything just released by the Fed's printer. Gold is now higher than before the FOMC statement and QE-favorites Energy and Financials are notably outperforming.

By now everyone is aware that when it comes to the Fed's "communication" with the public, there is a redacted layer which remains hidden for years, and which just happens to contain the jist of what the Fed truly sees... and then there is what is left for public consumption, such as the just released statement of pre-canned sentences and algo stimulating phrases. However, to get the full transcript of the thinking that went into the policy we have to wait until 2017. Today, courtesy of John Lohman, we fast forward five years for a word cloud of the transcript that backs today's FOMC statement. Enjoy the resulting time travel.

The initial knee-jerk response to a lack of Twist-extension or QE3 on the table was a notable drop in Gold prices, strength in the USD, Treasury yields rising (with 10Y popping back over 2%) and a big fat unch from stocks (and AAPL). The last 15 minutes have seen all of these markets pulling back from their abysses with 10Y now rallying back to unch from pre-Fed, the USD leaking back higher and Gold and Silver (testing below $30) pulling back off their lows. AAPL has leaked lower but the S&P 500 remains practically unchanged (though Energy and Financials are outperforming as Healthcare and Industraisl are underperforming) and VIX has dropped a little. EURUSD is now very slightly lower than pre-Fed. It seems the market would rather wait to look Ben in the eyes at the press-conference before really pulling any triggers.

...until courtesy of Sean Corrigan we found out that Boeing is merely the latest company to discover what GM recently discovered as have so many now defunct other companies. That when in doubt - stuff.

Sampling several investment banks' opinions on what to expect out of today's FOMC decision in a few hours, one would be left with the impression that absolutely nothing will happen. Not surprisingly, this is what the official party line reps and warrants as well, as telegraphed by that faithful mouthpiece, Jon Hilsenrath. And yet if the Fed has finally understood that its role is only effective if it is surprising, this gives all us all the opportunity to not only doubt what the media and the sellside wants us to expect, but to naturally fade Goldman - one of the best trades in the past three years - who says: "We expect no clarity from Wednesday's FOMC statement and press conference on additional monetary easing. Fed officials will not close the door but are also unlikely to provide a clear hint of further action. Our forecast of additional easing hinges not on what Fed officials say this week, but on our expectation of continued weakness in the economic data." Of course it is possible that the Fed is merely staying true to its recent creed of being honest and transparent and telegraphing policy from miles away. And is thus forced until the market is actually driven by actual macro data instead of who buys how many gizmos using student loans. Or not. Because when in doubt, always ask i) what would Goldman Sachs sell and ii) what would PIMCO buy. The two are rarely both wrong at the same time.

For the first time in over two months, Apple's implied volatility is now trading back below its realized volatility as its share price explodes 10% higher and overall implied volatility falls back to a more normalized level of the last six months. It seems, just as in the few months leading up to January's earnings report, that option-hedgers were very actively bidding up protection only to see it crushed on the miraculous realization of exponential growth. Will we repeat the same path in the next three months as implied volatility is once again at 3-month lows relative to realized vol?

I often wonder who is worse: George W. Bush — the man who turned a projected trillion dollar surplus into the greatest deficits in world history, who bailed out the profligate Wall Street algos and arbitrageurs, who proceeded with two needless, pointless and absurdly costly military occupations (even though he had initially campaigned on the promise of a humble foreign policy), who ignored Michael Scheuer’s warnings about al-Qaeda previous to 9/11, who signed the Constitution-trashing PATRIOT Act (etc etc ad infinitum) or his successor Barack Obama. The answer, by the way, is Richard Nixon. Nixonianism has been the corporate aristocracy’s crowning achievement. And to some extent, this period of free lunch economics was a banquet, even for middle class Americans. The masses were kept fat and happy. But now the game is up — like Nixon’s Presidency — its days are numbered.

Forget Big Macs, the only ubiquitous commodity that counts now in the global purchasing-power-parity pyramid of currency-wars is the iPhone. Deutsche Bank has created a comprehensive set of tables on what costs how much and where around the world so whether it is soft-drinks in Brazil or Germany (over 690% of New York prices), Beer in Japan (192% of US prices), or exercise in Russia (sports shoes are 221% of US prices), it is perhaps evident that the impact of these overseas revenues in nominal USD may indeed be helping juice US corporates as they bow to Bernanke's debasement wisdom. But how much longer will Russians (or the Chinese for that sake) continue to pay around 50% more for their iGadgets than us lowly Americans.

Universities are today’s centers of connection. They are one of the last vestiges of American tribalism and community in an age of self isolation and artificial technological cultism. Adults do not meet face to face much anymore to share knowledge, or discuss the troubles of the day. The academic world provides such opportunity, but at a terrible price. To connect with the world, students must comply. To be taken seriously, they must adopt, consciously or unconsciously, the robes of the state. They must abandon the passions of rebellion and become indifferent to the truth. All actions and ideas must be embraced by the group, or cast aside. They must live a life of dependency, breeding a culture of fear, for that which others to keep for us, they can easily take away. How could anyone possibly sustain themselves on a diet of congealing fantasy, and personal inadequacy? The intellectual life bears other fruits as well. Where it lacks in substance, it makes up for in ego, proving that being educated is not necessarily the same as being intelligent. The following is a list of common character traits visible in the average intellectual idiot, a breed that poisons the American well, and is quickly eroding away any chance of Constitutional revival…

Yesterday we had Apple sandbagging expectations with yet another round of low guidance, now it's Iran's turn, which through its Russian Ambassador just said the country will consider halting nuclear expansion to avert the EU oil ban. Needless to say, just as the Apple forward guidance so this "promise" is utterly worthless. But at least it punk'd the algos for the time being sending Brent and WTI down over $1 in a hurry.

So much for a moderate decline in the economy. As we warned back in February when we noted that the non-seasonally unadjusted collapse in durable goods was historic, now that the aftereffect of a record warm winter is fully gone, the March durable goods data comes in and it was a complete disaster: instead of dropping modestly by 1.7% as the consensus expected, the March actual print was a massive 4.2% decline, worse than the worst Wall Street forecast, or the most since January 2009! And it was not only airplanes as many were expecting (despite Boeing's just announced epic sales): the ex-transportation number was down 1.1%, on expectations of a 0.5% gain; even worse, capital goods new orders slid 0.8% on expectations of a 1% gain. And as usual inventories hit another record high. Overall, a horrendous print which confirms that the entire myth of a recovery in Q1 was warm weather driven, and that about 1% of the 2.5% or so consensus GDP was due to the weather. Expect the downward GDP revisions to come any second.But don't expect the market to react to this news at all: after all if anything, this simply makes NEW QE/LTRO more likely and is to be cheered by all habitual gamblers.

All eyes will turn to the Fed and the Fed statement. I think we get a slightly more dovish statement. More language that the economy shows signs of weakening and that the Fed is vigilantly watching the data to determine if additional actions are necessary. No change in low rates for extended period, though maybe their they soften the language further hinting that it could go on longer than 2014 if moderate economic growth continues. I don’t think they will say anything new on inflation, though they might try to hint that it is moderating in their eyes, again, paving way for more QE. So I suspect a dovish statement, but no QE. I think the market will initially like that, but we will see the enthusiasm wane as that seem very well priced in, and without QE, and once AAPL stabilizes, we can get back to focusing that on the whole the data here has been weak, and that the situation in Europe is deteriorating rapidly.

European equities are seen making modest gains at the midpoint of the European session; however underperformance is observed in the FTSE 100, with the UK economy falling back into a technical recession with an advanced Q1 GDP reading of -0.2%. Data from the ONS has shown that the UK’s weak construction sector weighed down upon the relative strength in services and manufacturing, pushing the economy into contraction during the first three months of the year. Following the UK GDP release, GBP/USD spiked lower by around 40 pips and the Gilt moved around 30 ticks higher, with GBP remaining weak as the US comes to market. Elsewhere, the Bundesbank held a technically uncovered 30-yr Bund auction, with the German Debt Agency commenting that the results reflect volatile and uncertain market conditions. Following the results, the Bund printed session lows and remains in negative territory. Looking ahead in the session, participants look forward to the FOMC rate decision, and the Fed’s projections release.